22 July 2018

Speech by BUSA representative on BRICS Business Council Busisiwe Mabuza

22 July 2018

Ladies and gentlemen, Minister Davies, Mr Xian Zhu, Mr Sihle Zikalala and Dr Survé. Presidential investment envoys Phumzile Langeni and Jacko Maree. And our colleagues in the business advocacy space, the Black Business Council, I greet you all on this Sunday morning as we put our heads together as a collective about how best to use the BRICS Business Council to advance South Africa’s economic goals.


Firstly, congratulations Phumzile and Jacko on your appointments as custodians of South Africa’s quest to attract $100bn in foreign direct and domestic investment. In his maiden state of the nation address (SONA) seven months ago, President Cyril Ramaphosa correctly prioritised investment as a key imperative to jumpstart the economy back on a growth path after years of a downward trend, precipitated by capital flight. We saw the president making dents on this ambitious target last week, when he secured pledges from Saudi Arabia and the United Arab Emirates (UAE) of investments worth $20bn into the South African economy. Suddenly, $100bn does not look like a daunting figure and seems within reach.


Saudi Arabia has expressed an appetite for investing into renewables, while the UAE wants to focus on mining and tourism. All three sectors – energy, mining and tourism – are crucial for making the South African economy tick and have been areas of focus within Business Unity South Africa (BUSA). It is, therefore, not a stretch to observe that the future investment flowing into renewable energy is a vote of confidence in South Africa’s internationally recognised independent power producer (IPP) programme, which has attracted billions of rands in investment since inception. The signing of the 27 IPP projects in April, with an investment value of R56bn, has clearly sent a positive signal to international investors.


However, policy uncertainty continues to haunt mining, while lack of clarity about South Africa’s visa regime remains a concern. BUSA notes the general slump in mining and the overall decline in sentiment in the sector against the backdrop of prolonged, complicated, and complex talks around the third Mining Charter. The first quarter GDP figures, wherein the economy contracted 2,2%, dragged down mainly by mining and manufacturing, should serve as a wake-up call to policymakers and decision-makers in government about how they affect the eco-system of investment.


For an economy such as ours, characterised by deep inequality and a skills mismatch, which manifest in high unemployment of our youth, the tourism sector is a low-hanging fruit whose full potential has not been tapped because of policy paralysis.


President Ramaphosa’s inaugural SONA address came at the right time and, in a few pages, proposed solutions to long-standing challenges. That February address represented an important moment in our country, and gave business confidence a boost, which a precondition for domestic investment. But that initial spike in business confidence is starting to falter both because of domestic factors and international developments.


The president correctly diagnosed the conditions that gave rise to South Africa’s economic slump, chief among them being administrative paralysis, lack of political will in implementing the National Development Plan, rampant and systemic corruption, and general institutional decline. That SONA address was a positive first step in laying the foundations and creating a conducive environment for South Africa to turn the economic corner.


In terms of the domestic climate, the current process spearheaded by the Constitutional Review Committee exploring the possibility of changing Section 25 of the Constitution to pave way for expropriation without compensation is a huge poser for business as the process has put the brakes on any long-term investment decisions, as business awaits its conclusion and final outcomes. In the absence of these, there is a general paralysis because of uncertainty about the end-state and how it will affect property rights. The debate around land expropriation without compensation is a tangible example of policy uncertainty. That is not to say the debate is not warranted, nor that land redistribution should not be pursued. However, the way the debate has been handled, the lack of clarity about modalities and the absence of a framework lend themselves to creating further uncertainty in an environment and an economy that need certainty and investment.


In the international arena, the threat to more than 7,000 local jobs posed by the imposition of tariff duties on South African steel and aluminium exports to the US remains a concern, as every job counts, and the country cannot afford further job losses in an economy underscored by a stubbornly high unemployment rate. Minister Davies, business acknowledges your efforts at a government-to-government level in trying to negotiate exemptions for South African exporters in this regard.


With that context in mind, the task of this Business Council is immense but not impossible, provided that the solutions identified on this platform in the working group sessions about sector-specific economic interventions are given careful thought and practical application.


In conclusion, there can be no job creation without investment – the two are mutually reinforcing. It is BUSA’s expressed expectation that South Africa has entered a serious phase of implementing and making good on its promise to create a climate that is not only friendly to foreign investors but also one that creates a conducive and enabling environment for domestic players, who keep the economy going.

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